Why Do Some People Mistake Forex for Gambling?

August 27, 2021 (Investorideas.com Newswire) When it comes to Forex trading and gambling, plenty of people often mistake the two as the same. But while it is easy to see why Forex trading can be perceived as gambling, there are subtle differences that can help draw the line between the two activities.

Forex Trading Explained

Forex trading, sometimes referred to as FX trading, is similar to buying and selling other securities like stocks and is often done through the foreign exchange market.

Since you're trading in what is essentially the largest global marketplace for exchanging national currencies, trading forex means that you are always trading a currency pair - or selling one currency while also buying another at the same time. If the currency you buy moves up against the currency you sold, you end up making a profit.

Due to the market's large size and 24/7 operation, approximately $5 trillion worth of forex transactions take place daily, equivalent to an average of $220 billion per hour.

Forex Trading vs. Gambling: What’s the Difference?

Is Forex Trading essentially gambling? Certainly not. There is indeed some percentage of what can be considered a "gamble" when you open up a Forex position, but that's only because no one can tell in complete certainty what a particular currency will do today. In short, there will always be a risk.

However, Forex Trading is not gambling because gambling is based on taking risky action in the hope of winning/profiting in the end. On the other hand, Forex requires the organized and systematic process of trade to make a decision.

When a trader makes a position in Forex, they have done so based on analysis and testing, much like seeing the dealer's hand before deciding on the casino. Forex traders will never know whether the trade they make will result in profit, but they will have enough reason to expect that their decisions would become profitable over time.

Whereas a gambler places their chances on the roll of a die, Forex traders base their analysis of what would happen on market conditions and other trading strategies, patterns, and indicators to increase the likelihood of winning the trades. Unlike gambling, there is also no "house" in Forex, only another trader with their interests.

This means that traders are never intentionally put in a worse position by the market, as it is entirely up to their tools and strategies to move the odds to their advantage and be ahead of the market.

That being said, if a person starts Forex Trading with the mindset of a gambler, then it could quickly turn into gambling. Moreover, suppose someone trades without a concrete plan, understanding the markets, or doing any prior research about the whole process. In that case, they are essentially gambling in the forex market.

Conclusion

While luck plays a minor factor in Forex Trading, it is a vastly different discipline from gambling and is one that requires a great deal of knowledge about the market and how it moves. The best way to do this, of course, is by getting a firm education on sites and resources like Capital.com where Forex trading is explained.

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